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Loans Guides
Bad credit loans
Updated Wednesday 21 September, 2011
By Martin Fagan - news@consumerchoices.co.uk
Where can I get a bad credit loan, and how do I find the best deal?
If you’ve been declined credit in the past and need a bad credit loan, you should shop around to find one with a low interest rate that might help to improve your credit history. Your options will be limited but, with a bit of research, you can still find deals with interest rates that shouldn’t be too onerous.
In this guide we show you how to get a bad credit loan and offer top tips on how to get the best deal for you.
You might also like to check out our guide to repairing your credit rating
- Where can I get a bad credit loan?
- Should I consider a secured loan?
- How do I choose a bad credit loan?
- Top tips on getting a bad credit loan
Where can I get a bad credit loan?
Whether companies are interested in lending to you will depend on how bad your credit rating is. You might find that some lenders are sympathetic if you speak to them in person, but most will base their decision on the results of a credit check which will give them a simple yes or no.
If you haven't done so already, you should definitely investigate your credit rating. Not only will checking your credit report reveal how you look to prospective lenders, it also gives you the opportunity to correct any information that is factually wrong and give yourself the best chance of being approved.
When looking for the best bad credit loan, don’t stop at the usual high street banks and building societies - many online lenders specialise in bad credit loans and secured loans. However: watch out for companies charging sky high interest rates. Find out how competitive a bad credit loan is by comparing it with similar loans from other lenders.
Should I consider a secured loan?
If you have bad credit, it’s worth trying to get an unsecured personal loan. However, a series of rejected loan applications may reflect badly on you and make your credit rating even worse. If you’re a homeowner, your best bet may be a secured loan (also known as homeowner loans).
If you’re not particularly good with money, you should only take out a secured loan if there’s really no alternative. The loan will be secured on your house, which means that if you miss payments on the loan or default entirely, the lender can take possession of your home and turf you out onto the street. If you must sign-up for a secured loan, keep your repayments to the absolute minimum by finding a loan with a low APR and by borrowing as little as possible.
How do I choose a bad credit loan?
The best thing to do is conduct plenty of research and then shop around for the cheapest deal. View your loan as a commodity to be sourced at the cheapest provider. That way, your repayments will be cheaper and you can save yourself a small fortune in interest repayments. Try to find the lowest APR and a lender that will be sympathetic should your circumstances change.
Before signing anything, ask your lender what will happen if you default on your payments - will you be able to arrange a new repayment scheme? Will there be a fee to do this? What happens if you can afford to repay your bad credit loan early - is there a fee for doing this?
Top tips on getting a bad credit loan
Follow our top tips to get the best deal on a bad credit loan:
Improve your credit rating – If you are struggling to find a lender that will lend to you, try everything you can to improve your credit rating. A good start would be to follow our top 10 tips to fix your credit rating.
Don’t borrow more than you need – You may increase the chances of getting approved by reducing the amount you want to borrow, and while it may be tempting to add a little extra to the loan amount to treat yourself, don’t do it. Borrowing more will cost you more in interest in the long run, and you’re likely to be in debt for longer, so only borrow what’s necessary.
Consider a secured loan - If you have a poor credit history, you are likely to have more chance of being approved for a secured loan than an unsecured one. As we’ve previously said, consider this option carefully, as you risk losing your home if you can’t meet your repayments.
Apply selectively - Don’t apply for lots of bad credit loans at once, as this could seriously damage your credit rating even further. Select the loans you apply for carefully, and spread your applications over a period of time. Also try and research a company’s lending criteria before you apply to see whether or not you match it.
If it looks like your financial circumstances don’t match with the potential lender’s ideal borrower profile there’s every likelihood your application will be rejected, so you’ll know not to waste your time and avoid adding another rejected loan application warning to your credit report.
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THINK CAREFULLY BEFORE SECURING ANY DEBTS AGAINST YOUR HOME.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP
REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT.